Paying for the NHS
BMJ 2000; 320 doi: https://doi.org/10.1136/bmj.320.7229.197 (Published 22 January 2000) Cite this as: BMJ 2000;320:197
All rapid responses
Rapid responses are electronic comments to the editor. They enable our users to debate issues raised in articles published on bmj.com. A rapid response is first posted online. If you need the URL (web address) of an individual response, simply click on the response headline and copy the URL from the browser window. A proportion of responses will, after editing, be published online and in the print journal as letters, which are indexed in PubMed. Rapid responses are not indexed in PubMed and they are not journal articles. The BMJ reserves the right to remove responses which are being wilfully misrepresented as published articles or when it is brought to our attention that a response spreads misinformation.
From March 2022, the word limit for rapid responses will be 600 words not including references and author details. We will no longer post responses that exceed this limit.
The word limit for letters selected from posted responses remains 300 words.
I congratulate you on your editorial this week, with its challenging
and realistic approach. Your authors are of course correct to say that a
system of opting out would be detrimental to funds available for those who
cannot
afford to pay.
A more important and topical question however is what would be the
effect of returning to the system of tax deductions for private health
insurance.
Clearly the Treasury would on the one hand lose income, whilst on the
other, there would be gain in reduction in demand. The political parties
are divided on this issue, and it would be extremely helpful to illuminate
the debate if
professionals such as your authors could give at least an imformed
estimate of the likely consequences. What, for instance was the effect of
New Labour scrapping tax relief for the over-60's?
Peter Dykes
Consultant Physician
Chadwich Manor, Redhill Lane, Bromsgrove B61 OQF
Competing interests: No competing interests
Sir,
We read with disquiet the editorial from Mossialos and colleagues on the
economists' approach to funding the NHS (1).
They suggest that the UK faces three separate issues. How much money does
it need to run a health service that is at least comparable to that in
neighbouring countries? What should it spend the money on? And how should
it be collected? Their conclusion is that it is more important to answer
the first question before the last.
We believe that the second question is the most important.
Although we agree that incremental increases in NHS funding are likely to
enhance healthcare provision, this is far from certain. Indeed,
disparities in funding levels between the countries of the UK do not seem
to have a direct effect on health outcomes (2).
We would argue that it is important first to determine an ethical
framework for resource allocation between competing public health
priorities. Failure to do so will ignore the government's commitment to
enhanced patient and public participation in defining health needs and
will instead serve to further reinforce the primacy of the acute sector
over population based approaches to health gain.
As to the method of funding, the only system which is consistent with the
principles on which the NHS was founded and is the least expensive to
administer is progressive direct taxation, whether hypothecated or not.
Dr Tony Baxter
Consultant in Public Health Medicine
Dr Greg Connor
Specialist Registrar in Public Health Medicine
Mr John Culver
Public Health Specialist Trainee
(1) Mossialos E, Dixon A, McKee M. Paying for the NHS. BMJ 2000;
320:197-8. (22 January)
(2) Dixon J, Inglis S, Klein R. Is the English NHS underfunded? BMJ
1999;318:522-526.
Competing interests: No competing interests
Mossialos, Dixon and Mckee make interesting contribution to the
debate on funding of the NHS1. They argue that for NHS expenditure to be
at par with health expenditures in neighbouring European countries, we
have to decide how much we need to run the NHS, how to raise this money
and what we should spend the money on.
We believe the problem with NHS funding at the moment is
predominantly the later rather than the former. Defining what we should
spend the money on is crucial to resource allocation and distribution of
healthcare. Rationing, needs setting or prioritisation (government’s
preferred terminology) is not an option. Priority setting is inescapable.
This is because of multiplicity of human wants. Secondly, resources are
scarce relative to needs, so that no matter what method of funding is used
(general taxation, social insurance or tax hypothecation) resources would
always be limited relative to needs.
Also, health need is infinite, relative and dynamic2. Because of
improvement in science, technologies and techniques new patient demands
and needs arise which is always disproportionately higher than available
resources. The health needs of the nation today is quite different from
the health needs of the nation at the inception of the NHS in 1948.
Besides, even if health needs are finite and resources unlimited it
is futile to try to meet all health needs because of alternative benefits
to be forgone and limitations imposed by our knowledge of science and
technology. Society would be worse off. Health is a product of healthcare
(NHS), natural endowment, individual lifestyle, good transport,
agriculture and nutrition, and good environment.
In this regard, NHS (healthcare) contributes 10% of our health with
the remaining 90% being due to non- – NHS preventive measures3 over which
doctors/health professionals have little or no control. Yet NHS activity
is crudely 96% curative and 4% preventive.
Furthermore, the rational rationing solution to NHS funding is
buttressed by the fact that public expenditure on NHS has always been on
the increase, irrespective of the government of the day4, while capacity
problems continue to plague the NHS. What is needed at the moment is an
open debate on rationing – on what the NHS can or cannot provide. We
already know how much money we spend on NHS and how it is collected, but
we do not know rationally the criteria for prioritisation of care and who
makes these value judgements. This is the crux of the matter.
Yours Sincerely,
O. O. Jibuike FRCS
Specialist Registrar
Emergency Unit, University Hospital of Wales, Cardiff.
References
1. Mossialos, E., Dixon, A. and Mckee M. Paying for the NHS. Br Med J
2000, 320: 197-198.
2. Mooney, G. Need, Demand and the agency relationship in Economics,
Medicine and Healthcare. London. Harvester/Wheatsheaf 1992, 67.
3. Hunter, D. J. The Dilemma of Rationing Health Care: Origins and
Definitions in Desperately Seeking Solutions Rationing Health Care.
Harlow, Essex. Addison Wesley Longman Limited 1997, 18.
4. Ham, C. (ed) The inevitability of rationing in health policy in
Britain in The politics and Organisation of the National Health Service
1993. London. The Macmillan Press Limited, 251.
Competing interests: No competing interests
We are very grateful to Breslin for his kind words, and for the
generally favourable comments by Longley. We would, however, like to
respond to some of the points he raised.
First, his points on
hypothecation are largely entirely true and, no doubt, would be accepted
by government were the relative powers of the Treasury and Department of
Health to be reversed. We see no evidence that this is likely to happen.
Hypothecation would bring some benefits to the DoH but, as Longley notes,
would significantly weaken the power of the Treasury.
We do, however, take
issue with his comments about the economic cycle hitting both hypothecated
and general taxes equally. Tax revenues can fluctuate quite markedly over
the cycle, especially where they are derived from direct taxation rather
than, as with the overall tax take, from an increasingly wide range of
sources. If the NHS was dependent on a fixed proportion of direct taxation
there would be no scope to protect it at the expense of, say, expenditure
on defence. It would thus be more vulnerable over the cycle.
The point about devolution is an interesting one, and raises issues that
are extremely poorly understood. The UK, unlike federal or confederal
states, does not have any formal devolution of sovereign powers to its
constituent parts. In Germany, for example, the Federal Government is
prevented by the constitution from instructing the Lander government what
do in certain areas, such as many aspects of health policy. Although,
formally, responsibility for certain matters has been devolved to the
Scottish, Welsh and Northern Irish assemblies, this is always subject to
the power of Westminster to over rule them where their decisions might
clash with UK policy as a whole. It will be interesting, for example, to
see the nature of the debate over the forthcoming Scottish Freedom of
Information bill. Some of these issues are already emerging in relation to
university fees. Consequently it is important not to over-estimate the
impact of devolution.
Competing interests: No competing interests
The editorial by Mossialos and colleagues on the funding of the NHS
effectively dismisses the false panaceas of private or state insurance.
But their arguments against hypothecation are surely less convincing.
First, the relative power of the Treasury is set to decrease anyway,
under the influence of UK devolution and the growing power of the EU...
and thank goodness for that! Second, if hypothecation were to increase
the demand for NHS expenditure, is that necessarily a bad development?
Third, it does not necessarily follow that increased expenditure on the
NHS will reduce that on other (more beneficial) areas of public
expenditure, such as transport and the environment. Finally, it is not
clear why hypothecated tax should be more vulnerable to economic
fluctuations than is the present system.
The core issue here is one of democratic control, informed by 'grown-
up' debate. Discussion in the UK on the future of the NHS seldom rises
beyond the level of the nursery because politicians have not trusted the
public with adult choices. Allowing the electorate to have a more direct
say over how their taxes are spent - whether by hypothecation,
referendums, or other methods - is a bit scary for control freaks, and
somehow seems 'un-British'. But the experience of the past few years has
demonstrated that there is really no alternative - people will continue to
moan about the NHS when they are excluded from any real decisions about
it, and those who can afford to do so will eventually vote with their feet
and take out private insurance, thereby creating a two-tier service by
default.
Arguably the greatest change introduced by this government has been
to devolve some of its power to Scotland and Wales. It should now keep
faith with the electorate, and trust people throughout the UK to make some
of the big choices for themselves. In this way, we can achieve an element
of the discipline of the market - allowing people to choose what to buy -
while retaining social justice.
Competing interests: No competing interests
What a sensible editorial on the funding of the NHS. It clarifies
the core issues and should put to bed the more outrageous discussion
regarding private insurance, national insurance, etc. One also has to
remember that greater complexity in raising funds requires addditioanl
administration which also costs money. Let sensible debate and discussion
continue in the manner demonstrated in this editorial.
Competing interests: No competing interests
Tax relief and private medical insurance
Peter Dykes is quite right to point out the potential value to debate
of assessing the balance of advantage from giving tax relief for health
insurance premiums - especially since the figures needed for an outline
estimate are in the public domain.
We may start with two simplifying assumptions; that all private
medical treatments would otherwise have been equivalently required to have
been provided in the NHS, and that persons covered by insurance do not
increase their consumption of NHS services not covered by their policies.
Then we strip out from premiums the overhead and adminstrative costs
and profits of the insurance companies. Currently (1997) the UK insurance
industry pays 79% of premium income in claims - but at this rate, insurers
were incurring serious losses, and a long-term claims proportion of 75% is
more realistic.
Secondly we should strip out the equivalent overhead costs and non-
treatment extras (single rooms etc) from provider prices. The best way to
do this is to match published private procedure tariffs - including
consultant fees - with equivalent average procedure figures in the
published schedule of NHS HRG reference costs. Hence, a cataract
extraction and lens prosthesis, which would be priced at £2,100 when
charged against health insurance, would cost the NHS £847; while a hip
replacement, charged to an insurer at £6,500, would cost the NHS £3,678.
Having reviewed all the top dozen private procedures, it can be stated as
a general rule of thumb that the reported average NHS cost is generally
around half the private insurance tariff.
It follows that £1 of premium income may be expected to permit some
75p in treatment claims - and this would equate to around 37p in NHS
costs. Hence, while there is a margin for debate around specific figures,
it may be safely concluded that, if tax relief were to be allowed at the
Hgher Rate of income tax (40p), the Treasury would invariably lose.
Whether there might be a case for offering a restricted rate of tax
relief - would depend on how far our two initial simplifying assumptions
may be contradicted in practice. Unfortunately, the evidence is not
hopeful - as there is little direct evidence that persons who are covered
by private health insurance are disposed to reduce their consumption of
NHS services - nor is there any reason why they should. Indeed, it is
highly likely that their consumption of some NHS services - e.g. GP
consultations - may tend to increase.
Tom Hennell
Competing interests: No competing interests